Political Storms Cloud Eurozone's Future

The politics of the Eurozone are evolving. As progressive and conservative visions for the continent's economic future emerge, unprecedented levels of cross-border political co-operation are now also taking place. In the short-term, this could fracture the Franco-German axis. Taking a longer perspective, however, we might be witnessing the birth of transnational partisan politics.

Earlier this month, German Chancellor Angela Merkel announced she will campaign for French President Nicolas Sarkozy in this spring's elections. And this week, Der Spiegel reported secret diplomacy has been underway for months between Merkel's CDU headquarters in Berlin and the offices of Sarkozy's UMP Party in Paris. Indeed, Merkel's team is expending as much energy on the French presidential race as they would on an important regional election at home.

This is an unprecedented move, reversing decades of German impartiality in the domestic affairs of their neighbors. While driven by fear the fiscal pact agreed to save the Eurozone might be overturned if the French Socialist Party's candidate for President, Francois Hollande, wins the election, the consequences of this strategy could be far-reaching, indeed.

On the very same day the pact was originally outlined by Merkel and Sarkozy in Paris last December, Francois Hollande chose to address a gathering of Germany's official opposition party, the Social Democrats, at their bi-annual congress in Berlin. There, he argued that the pact - which includes automatic sanctions for member states that fail to keep budget deficits under 3% of GDP, makes it easier for EU regulators to challenge national budget policies, and enshrines a "golden rule" to balance budgets - was an attempt to "constitutionalize Austerity." Hollande proposes to re-negotiate the treaty so as to complement commitments to fiscal responsibility with obligations to favor pro-growth policies on the part of the European Central Bank and the creation of EuroBonds and Euro Firewall.

Today, the juxtaposition is striking. While the Franco-German axis remains at the heart of Europe, a political storm is developing between competing visions of Europe's future: one progressive, the other conservative; one focused on growth, the other on austerity.

In the past, the Franco-German axis drove Europe forward through cross party consensus. Helmut Schmidt was a social democrat and Giscard D'Estaing a conservative. Together they founded the European Monetary System, the precursor of the Euro. And the Euro itself was brought to life by the Christian Democrat Helmut Kohl, and the Socialist Francois Mitterand. Interestingly, at the Social Democratic Party's congress in Berlin, Helmut Schmidt, chose to be critical of Merkel's handling of the crisis. Germany, he argued, had an historic obligation to return the generosity its neighbors and current allies had shown following the Second World War, and a moral obligation to act with greater solidarity given it had benefited most from the Euro. While foreshadowing the substance of Hollande's speech the following day, Schmidt rationalized an alternative strategy in terms of historical obligation and enlightened national interest, not a new European progressive vision at odds with the continent's current conservative leadership.

Elsewhere, however, there are indications that a transnational progressive movement to counter the Merkel-Sarkozy alliance is taking shape. Last weekend, in Seville, candidates for leadership of the Spanish Socialist Party echoed calls for a progressive response to the crisis. Hollande's advisors were present, as too were delegates from the German Social Democratic Party. In Berlin too, they have begun privately to express their sympathy for a more progressive policy. The difficulty German Social Democrats face is that Merkel's approach is proving popular at home. Indeed, this week her ratings have jumped two percentage points to 38 percent, their highest levels since August 2009.

With Federal elections scheduled in Germany for Fall 2013, the big question is whether the Social Democrat's chairman, Sigmar Gabriel, will take the risk and campaign alongside Francois Hollande? A progressive resolution to the debt crisis will be hard to sell to the German public, even if it he believes it to be a more effective and appropriate solution in the long-term. Indications are that he will. The Foundation for European Progressive Studies -- led by the Italian Democrat and former Prime Minister, Massimo D'Alema -- is set to hold a gathering in support of Hollande next month, and Gabriel is scheduled to speak.

The next few months, then, could profoundly reshape European politics for years to come. Progressive in Europe should hope that they do.